Silven Properties v Royal Bank of Scotland plc [2004] 1 WLR 997

Receiver appointed in relation to mortgaged property adopted fiduciary duty of care

Facts

The claimant was a property company which had several mortgaged properties with the defendant bank. The claimants defaulted and receivers were appointed as specified in the mortgage deed. All the properties were sold. The claimants alleged that they were sold by the receivers at an undervalued price.

Issue

The claims were dismissed at first instance. The claimant was granted permission to appeal against the receivers with respect to their role in the sale of six of the properties. The claimants argued that the receivers had, inter alia, failed to pursue planning applications in relation to the properties and had failed to find tenants for vacant properties.

Held

The appeal was dismissed. The appointed receiver had different duties than the defendant bank. Whilst the receiver was required to account to the claimant, the receiver’s primary duty was to ensure that the mortgage debt was repaid in full. The receivers had assumed a fiduciary duty of care which was owed to the bank, the claimants and others who may be interested in the equity of redemption. The nature of the fiduciary duty is not affected to the special character of agency between the parties, whereby the receivers were appointed as agents of the claimants. It was within the discretion of the receivers to sell the property without attempting to increase its value. Accordingly, the receivers were entitled to halt applications for planning permission and there could be no imposition on the receivers of the obligation to take certain pre-marketing steps as was contended by the claimants.